Sheila Kazzaz and another v Standard Chartered Bank and others [2019] SGHC(I) 15

Introduction

The first and second plaintiffs, Sheila and Ahmed Kazzaz (“Sheila” and “Ahmed”) are mother and son (collectively, “the Kazzaz family” or “the Plaintiffs”). They are UK citizens, but have resided in Dubai since 2004. The ASK Group is the Kazzaz family business. Sarchil Kazzaz (“Sarchil”), who was Sheila’s husband and Ahmed’s father, established the ASK Group. Ahmed succeeded Sarchil as chairperson of the ASK Group upon the latter’s passing away in 2007. Between 2010 and 2014, when the events that are the subject of these proceedings took place, the ASK Group was largely engaged in business in Iraq, including property investments and duty-free retail shops.

The first defendant, Standard Chartered Bank (“SCB”), is a UK-incorporated multinational bank with branches in Singapore and the Dubai International Financial Centre (“DIFC”). The Kazzaz family became private banking clients of SCB’s DIFC branch (“SCB DIFC”) in October 2010. The second defendant, Laurence Black (“Laurence”), was SCB DIFC’s Head of Fiduciary Services for Middle East and North Africa until December 2012. The third defendant, Harish Phoolwani (“Harish”), was (and remains) an SCB DIFC Director. He was Ahmed’s and Sheila’s Relationship Manager until August 2012. The fourth defendant, Naushid Mithani (“Naushid”), was SCB DIFC’s Head of Relationship Management and Investment Advisory from May 2010 until March 2011, when he became Head of Private Banking. Naushid was introduced to Ahmed in February 2011. Laurence, Harish and Naushid are sued in their personal capacities. Collectively, SCB, Laurence, Harish and Naushid will be referred to here as “the Defendants”.

During the course of the Plaintiffs’ private banking relationship with SCB, trust structures with SCB’s affiliated trust companies (Standard Chartered Trust (Guernsey) Limited (“SCTG”) and Standard Chartered Trust (Cayman) Limited (“SCTC”)) were set up to hold various assets, and accounts were opened with SCB’s Singapore branch (“SCB Singapore”). Ahmed took out a loan from SCB to pay (1) the premium (“the premium loan”) for a universal life insurance policy (“the Policy”) on Sheila’s life and (2) a mortgage (“the mortgage”) for a property (“the Westchester Property”) where his daughter Lana resided while studying in London. Ahmed also decided to invest the proceeds from the sale of Ducie Court (“Ducie Court”) (one of the family’s properties in Manchester) in an investment portfolio with SCB.

Ducie Court was owned by two Liberian companies, Financial Links Limited and Norley International Limited, which Sarchil had set up with Rathbone Trustees Jersey Limited in the 1980s. Rathbone Trustees later became Hawksford Trustees (“Hawksford”). In January 2008 Ahmed set up a trust called the St. Bernard Trust to hold the Liberian companies. This was to remove Dana (Ahmed’s sister) from the trust following a dispute with her. Hawksford was also trustee of the ASK Trust, which had been established by Sarchil to hold the licence to operate duty free shops in Iraq. Ahmed was unhappy with what he regarded as Hawksford’s opaque billing practices and planned to terminate the St. Bernard Trust on the sale of Ducie Court.

SCB is sued as being vicariously liable for the acts of Laurence, Harish and Naushid. More specifically, the Plaintiffs allege that the Defendants are liable to them for (1) negligent misrepresentation under the common law or the Misrepresentation Act (Cap 390, 1994 Rev Ed) (“the MA”), (2) breaches of the common law duty of care, and (3) breaches of the DIFC Regulatory Law (DIFC Law No.1 of 2004).

On negligent misrepresentation, the Plaintiffs’ case is that the Defendants wrongfully induced Ahmed and Sheila to enter into a Property Financing Arrangement (“PFA”) that was unsuited to their financial needs. Under the alleged PFA, SCB was to provide or arrange for the following financial products and services:

(a) the mortgage to fund the purchase of Westchester Property and thereby enable the proceeds from the sale of Ducie Court to be used for an investment portfolio.

(b) the Policy, with financing for the Policy’s premium being made available through the premium loan.

(c) offshore trusts and companies to hold assets of the Kazzaz family, including the Westchester Property and the Policy.

The plaintiffs complain that they were induced to enter into the PFA as a result of three representations by SCB:

(i) Alleged Misrepresentation (1): From April 2010 to February 2011, SCB (acting through Laurence, Harish and Naushid) misrepresented to Ahmed that the PFA was a self-funding arrangement so that (a) investments made using the Ducie Court sale proceeds would generate sufficient returns to meet the interest payments arising from the premium and mortgage loans and (b) Ahmed would not have to provide further funds as security for the premium or mortgage loans.

(ii) Alleged Misrepresentation (2): From April to October 2010, SCB (acting through Harish and Laurence) misrepresented to Ahmed that Sheila and he need not be concerned with reviewing, understanding or seeking professional advice on the documents to be executed under the PFA as SCB would ensure that the documents would be in the best interests of Ahmed and his family.

(iii) Alleged Misrepresentation (3): From April 2010 to February 2011, SCB (acting through Laurence, Harish and Naushid) misrepresented to Ahmed that the PFA was suitable for the Kazzaz family.

On breaches of the common law duty of care, the Plaintiffs contend as follows:

(a) Alleged Breach (1): The Defendants did not explain, highlight or make known to Ahmed the true and full extent of his liabilities to SCB in relation to the repayment of the premium loan.

(b) Alleged Breach (2): The Defendants failed to highlight the currency risk inherent in the PFA to Ahmed.

(c) Alleged Breach (3): The Defendants failed to highlight that the guaranteed death benefit under the Policy was only until Sheila turned 86.

(d) Alleged Breach (4): The Defendants failed to explain the rationale or necessity for the Policy to be purchased and held by SCTG.

(e) Alleged Breach (5): The Defendants failed to ensure that the Kazzaz family had the means to meet their obligations under the PFA.

(f) Alleged Breach (6): The Defendants failed to advise the Kazzaz family sufficiently or properly about the suitability of the PFA.

(g) Alleged Breach (7): The Defendants failed to explain the significance of being a “Professional Client” to the Plaintiffs and to assess their suitability of being classified as such.

On breaches of the DIFC Regulatory Law, the Plaintiffs make the following complaints:

(a) Alleged DIFC Law Breach (1): SCB failed to ensure that its financial recommendations were suitable for the Kazzaz family.

(b) Alleged DIFC Law Breach (2): SCB failed to ensure that the financial information that it provided was clear, fair and not misleading.

(c) Alleged DIFC Law Breach (3): SCB breached its regulatory duty of care.

(d) Alleged DIFC Law Breach (4): SCB failed to carry out a proper client classification of the Kazzaz family as “Professional Clients”.

(e) Alleged DIFC Law Breach (5): SCB breached the prohibition in Article 94 of the DIFC Regulatory Law by operating as an insurance intermediary.

The Plaintiffs say that Laurence, Harish and Naushid are individually liable under the DIFC Regulatory Law as they provided financial services to the Kazzaz family personally of their own accord.

It is the Plaintiffs’ case that, by reason of the negligent misrepresentations, breaches of the common law duty of care, and breaches of the DIFC Regulatory Law identified above, the Plaintiffs suffered loss and damage. By this action they claim compensation for such loss and damage.

Factual analysis

In this section I consider the factual matters in dispute between the two sides. By way of preface, I make three comments.

Second, many of the events that these proceedings are concerned with happened many years ago. Some matters took place nearly a decade ago. In those circumstances, I have exercised caution when assessing parties’ recollection of events. I have reminded myself that, given the effluxion of time, parties are bound to have false memories, that is, apparently remembering clearly that something did or did not occur, when the reality was very different. Thus, I have attempted to test parties’ recollection of events against contemporaneous or near contemporaneous documents in the trial bundle. In some instances, where supporting documents were sparse or non-existent, I have had to come to conclusions based on the balance of probability and common sense. The Plaintiffs in particular have urged me to conclude, because something was not recorded in an SCB contact report as having been said, that no such statement was made. But the contact reports do not purport to be comprehensive summaries of what transpired at a meeting. For that reason, it would be too simplistic an analysis to find that something did not happen purely based on what has not been recorded in a contact report. Just as any other piece of evidence, contact reports need to be assessed in light of the totality of the available evidence, including other contemporaneous documents, witness evidence under cross-examination, the balance of probability and common sense.

Third, in this section and the succeeding one, there will be some consideration of DIFC law. The parties agreed that each would make submissions on DIFC law to me directly, rather than through the traditional method of employing expert witnesses. Thus, in advance of the substantive hearing, the parties identified the issues of DIFC law that I would have to consider in this action. Thereafter, the parties with the assistance of DIFC lawyers incorporated their submissions on disputed matters of DIFC law in their written closing submissions.

Meeting on 27 April 2010

There is no dispute that Ahmed first met Harish on 27 April 2010 following an introduction by Marlon Sawaya (“Marlon”), the ASK Group’s Relationship Manager at SCB’s Small and Medium Enterprises (SME) Division. There is disagreement over what precisely was said at the meeting.

Ahmed says that he informed Harish of his intention to sell Ducie Court, to terminate the St. Bernard Trust, deposit the sale proceeds from Ducie Court with SCB and use those proceeds to purchase a property in London. Harish is alleged by the Plaintiffs to have suggested that the Ducie Court proceeds could better be deployed in a PFA that would enable Ahmed to purchase a London property while also generating wealth for the Kazzaz family. Ahmed claims that at the meeting, Harish introduced the idea of insurance referrals and premium financing and pitched SCB’s fiduciary services, including the setting up of trusts and personal investment companies.

SCB denies that a PFA was raised at the introductory meeting with Ahmed or at any time. SCB says that the Plaintiffs’ case of SCB proposing a PFA for the purchase of a London property is a complete myth. SCB is adamant that its representatives never mentioned a PFA. SCB accepts that over time Sheila and Ahmed entered into various financial arrangements with SCB or associated companies. But SCB says that such arrangements evolved incrementally as and when Ahmed requested a specific service from SCB and not as part of an over-arching scheme that would cater for all needs of the Kazzaz family at one go. At the first meeting, SCB claims that Harish was simply informed that Ahmed had an interest in SCB’s fiduciary and estate planning services. In support, SCB relies on the fact that Harish emailed Ahmed on 28 April 2010 to introduce Laurence (who handled fiduciary services) and on 7 May 2010 to inform Ahmed that Michael Evans (“Michael”) of the law firm Burges Salmon LLP would be in Dubai and could assist with possible estate planning and trust arrangements.

In my view, Ahmed’s recollection of what happened at the first meeting is likely to be the more accurate. Harish’s 28 April 2010 email to Ahmed introducing Laurence began as follows: “It was pleasure meeting you yesterday, step by step we are going to present you on creating value add from Standard Chartered Bank Globally.” The reference to creating value “step by step” suggests that Ahmed’s plan to sell Ducie Court and buy a London property with the proceeds was discussed. The reference also indicates that Harish proposed that Ahmed’s objectives might be better achieved through an arrangement which would enable him to purchase a London property while at the same time “creating value add”. The message that Harish conveyed was that SCB could assist Ahmed to achieve such an outcome “step by step”. Harish’s 28 April 2010 email then introduced Laurence using these words: “I am also going to arrange for meeting with Mr. Laurence Black on Fiduciary (Trust and Personal Investment Companies) aspects of your wealth.” This indicates that, at this early stage, it was contemplated that one component of the arrangement might possibly involve the use of fiduciary services (such as the holding of assets on trust). For this reason, Harish was “also” introducing Laurence who would then deal with the fiduciary “aspects of your [that is, the Kazzaz family’s] wealth”.

The foregoing conclusion is further supported by reference to an internal email from Harish to Laurence on 8 November 2010. Harish there referred to his initial meeting with Ahmed (wrongly said to have occurred in March 2010) as follows: “I think you [Laurence] would agree with me since the time we have been coordinating with him [Ahmed] on giving him responsible solutions on the trust aspects. he has been constantly asking about the insurance policy, since I pitched it to him in the month of March 2010.” It appears from this that, as early as his first meeting with Ahmed, Harish had at least floated the idea of purchasing the Policy as part of an arrangement to achieve Ahmed’s objectives.

Exchanges between April and August 2010

Ahmed did not reply to Harish’s emails of 28 April 2010 and 7 May 2010. Harish called Ahmed to follow up, asking Ahmed if he would like to have a conference call with Michael, so that Ahmed could get some “idea and food for thought and how the plan’s going to be, what the structure is going to be and how it’s going to look like”. Thereafter, the two did not communicate until August 2010.

On 5 August 2010 Ahmed emailed Harish that “it might be a good time to come and see you and start to talk about my future investment plan and how you could best assist me with investing the £5m that I will net from the property disposal in England”. The email also attached information on Ahmed’s business activities in Iraq. Ahmed met with Harish and Marlon on 8 August 2010 and it appears that their discussion focussed on how Ahmed might exit the existing trusts of the Kazzaz family property. Harish says (and I accept) that Ahmed observed that he wanted to set up a private banking account to move the sale proceeds from the existing trusts and asked if SCB could take over the same. Harish asked Ahmed for the trust deeds. Harish emailed Ahmed on 11 August 2010 to suggest that Laurence could assist in setting up Ahmed’s foundation with SCB.

On 24 August 2010 Harish spoke to Ahmed over the phone and Ahmed explained again that he did not want to place the Ducie Court proceeds with Hawksford. Ahmed said that he wished to open an account with SCB to receive the proceeds and repeated that he wanted to change trustees. On 26 August 2010 Ahmed sent Harish the trust deeds for the St. Bernard Trust and the ASK Trust. On 28 August 2010 Ahmed emailed Harish to say that he was going to be in Jersey on 7 September 2010 to meet Hawksford. Ahmed asked if Harish could arrange an appointment for Ahmed to open a private banking account with SCB’s Jersey branch. Ahmed said that he hoped to receive some information about SCB’s trust services before he left for Jersey.

Harish replied on 30 August 2010, acknowledging receipt of the trust deeds and again introducing Laurence to Ahmed. Harish pointed out that it was not necessary for Ahmed to be in Jersey to open an SCB account there. Nonetheless, Harish offered to fly to Jersey to meet Ahmed. Harish wrote: “This would also give us a chance to show our capabilities from Trust Officer themselves and we can also address all potential ambiguities around the current structures and other matters.” Ahmed responded by email on 31 August 2010, detailing his existing trust structures. He observed that he was “very keen, if possible during [his] trip to Jersey, to move the two trusts and the assets out of the hands [of] Hawksford”. Soon after 31 August 2010 Ahmed told Harish and Laurence that he wanted to discuss his existing trust structures and possible solutions at a face-to-face meeting.

SCB submits that, throughout the foregoing exchanges Ahmed made no mention of an “arrangement”. Instead, SCB stresses that at this point Ahmed was not a client of SCB and suggests that the discussions between Ahmed and SCB simply centred on the trust services that SCB could provide. But that does not seem correct to me. While I would accept that discussions were at a preliminary stage, it appears that the parties were not just talking about trust services in the abstract. What was being explored was how SCB’s trust services might be used to hold Kazzaz family assets. In conjunction, it was specifically envisaged that the proceeds from the sale of Ducie Court would be lodged in a private banking account with SCB, presumably as one piece of a financial arrangement towards which SCB and Ahmed were working.

Meeting on 8 September 2010

Ahmed met Clive Harrison (“Clive”), a Senior Fiduciary Specialist in the private banking division of SCB’s London branch in Jersey on 8 September 2010. The purpose of the meeting, as mentioned by Laurence to Clive in an email dated 6 September 2010, was to “discuss his [Ahmed’s] concerns and evaluate his/the families objectives and assets that they wish to retain/place into trust in order to propose a suitable SCB solution”. Clive prepared a contemporaneous note of the meeting. It seems to me that the note, as amplified by Clive in video-link evidence at trial, is the most reliable evidence of what happened at the meeting. This is especially since Clive no longer works for SCB and voluntarily agreed to give evidence notwithstanding.

It appears that Ahmed provided information at the meeting on the Kazzaz family’s existing trust structures and its assets in France and Iraq. That information included estimates of the value of such assets. There is a dispute among the parties on whether the estimated values had come from Ahmed as his evidence at trial was that the values recorded in Clive’s note were “out of proportion”. Ahmed says that he would not have valued his Iraq properties at US$50 to 60 million, since that amount “would buy half of Baghdad ... at the time”. The Plaintiffs suggest that there was no reason for Ahmed to come up with such a figure. Nonetheless, it seems to me that the figures which Clive recorded were likely to have come from Ahmed.

I note, for instance, that on 5 August 2010 Ahmed sent an email to Harish (copied to Marlon). The email stated:

The email included as an attachment the English translation of an Investment Licence No. 48/2010 dated 6 July 2010 (“the Licence”) in favour of Leadstay (a company within the ASK Group) as investor. The Licence stated:

The Licence contained a number of undertakings, including at paragraph 8:

The Licence identified the person making the undertaking as:

Asked about the Licence at trial, Ahmed responded as follows:

It may be that, as Ahmed testified, the Iraqi investment project has yet to start because the Kazzaz family is still looking for investors. But the document as emailed to Harish in August 2010 (without any qualification that an undertaking in terms of paragraph 8 of the Licence had never been given and the investment project was still in search of investors) would have given (and was likely intended by Ahmed to convey) the impression that the Kazzaz family had substantial means, at least enough to support an undertaking that a company within the ASK group had the “financial capability ... to execute the [Iraqi] project with invested amount ($35.000.000) thirty five million dollars or bid bond”.

Cross-examined by SCB’s counsel (Ms. Tan) about whether he had provided details and (if so) what details about his net worth to SCB, Ahmed replied as follows:

I conclude from the foregoing exchange with counsel that, in all likelihood, although he can no longer recall doing so, Ahmed did provide SCB and its officers (including Harish, Laurence, Naushid and Clive) with ballpark estimates of his net worth and the value of his assets. As he himself had no idea of his net worth at the time, the figures given would have been rough-and-ready estimates and may have been simplified by being rounded up. Thus, for instance, I do not rule out the possibility that the figure of US$35 million mentioned in the Licence was rounded to a broad figure of US$50 million in the course of discussions.

Ahmed also told Clive that he wanted to exercise more control over the investment than he had under his existing trusts. Clive suggested that separate structures be set up for the Kazzaz family’s assets in France and Iraq. The possible use of a trust to hold a life insurance policy was also discussed. Clive’s evidence (which I accept) was that Ahmed seemed familiar with the concept of using trust structures and was eager to have such trust structures in place.

Meetings on 22 September 2010

On 22 September 2010 Ahmed met Harish, Laurence and Mark Jackman (Global Head of Fiduciary Services) at lunch. There was a discussion about the Kazzaz family’s circumstances. Laurence explained the difficulties that Ahmed would face in passing his assets to his two daughters under shari’a and French inheritance laws. Although impressed by the information that Laurence imparted, Ahmed says that he developed a “fear factor” in his mind about not being able to pass his Iraqi and French assets to his daughters. Ahmed’s evidence is that he was persuaded then and there to set up trust structures along the lines that Laurence had sketched out. Ahmed further recalls that Harish and Laurence advised at the meeting that the best thing for him to do was to take an insurance policy over his life since he was the breadwinner for some ten dependents.

On the same day, after lunch, Ahmed met with Jyotsna Pandey (“Jyotsna”) from IPG Financial Services Pte Ltd (“IPG”). The reason for the meeting (as Harish had previously explained to Ahmed) was that SCB could not sell or advise on life insurance policies. Ahmed thus had to be referred to IPG for this purpose.

The parties give conflicting accounts of what happened at the meeting with Jyotsna.

Ahmed says that, at the meeting, Jyotsna did not speak. Instead, Harish did all the talking. Harish is thus alleged to have explained that it would be possible to obtain an insurance policy on a person’s life with a net death benefit of US$21.5 million up to the age of 100. Ahmed’s evidence is that he asked Harish at the meeting to explain “what the point of the life insurance policy was and how it worked”. According to Ahmed, Harish did not do so, but stated that he could only demonstrate how the life insurance policy would work after the amount of coverage under a policy to be acquired had been confirmed. Harish instead only described in general terms how a policy worked.

In contrast, Harish says that he left it to Jyotsna to introduce IPG’s services to Ahmed and conduct her own due diligence on Ahmed and his insurance needs. Jyotsna is said by Harish to have explained the features of a universal life insurance policy and to have told Ahmed that he could speak to Harish if Ahmed wished to obtain financing for the premium. According to Harish, it was pointed out to Ahmed that the premium would involve the upfront payment of a large sum due to the high death coverage. Harish’s evidence is that at the meeting he explained to Ahmed how premium financing worked. Harish says that he told Ahmed that one could borrow up to 90% of the Day 1 cash surrender value of a policy and pay the difference between that amount and the premium amount one’s self or, alternatively, one could provide security in cash or assets for the shortfall amount if one wished to take out a loan for the entire premium. Harish further says that he told Ahmed that, if the Day 1 cash surrender value of the policy dropped, a customer may have to top up the account. Ahmed is said by Harish to have observed that he could use the Ducie Court sale proceeds as collateral since he intended to deposit them with SCB. Harish recalled that Jyotsna mentioned to Ahmed that it would be difficult for him to be insured as he was frequently in Iraq and that both Sheila and he would have to undergo a medical examination as part of the application process.

I prefer Harish’s version of events as likely to be the more reliable, in particular because it is consistent with contemporaneous documents. I make three further observations.

First, as SCB points out, Ahmed’s account contradicts the email from Jyotsna to Harish dated 22 September 2010, attaching generic illustrations for a face amount of US$30 million up to the age of 100 for the purposes of the meeting with Ahmed that day. Ahmed accepted during cross-examination that he had seen similar illustrations, but he could not recall whether it was at the meeting on 22 September 2010 or some other time.

Second, Ahmed’s account of events is contrary to Jyotsna’s contact log for the meeting. The log records that the following were discussed:

(a) Guaranteed and current interest rate

(b) Interest rate history

(c) Break even and cash value projection

(d) No lapse protection

(e) Worst case scenario

(f) Stability of insurance carriers

(g) Premium financing (covered by the relationship manager)

The contact log also notes that Ahmed was unlikely to obtain coverage and Ahmed would discuss with his mother and confirm a date for the medical examination. Further, if (as appears to have been the case) the generic illustrations discussed were for a face amount of US$30 million, Ahmed’s recollection that the parties were only discussing a policy with a face amount of US$21.5 million at the meeting is not likely to be correct.

Third, Ahmed’s own evidence was inconsistent. During examination-in-chief, Ahmed accepted that the contact log accurately set out what happened at the meeting with Jyotsna on 22 September 2010. He was asked:

But, in the course of cross-examination and re-examination, he maintained that the contents of the 22 September 2010 contact log (as well as other IPG contact logs) were false.

On the following day, Harish emailed Ahmed to confirm that the medical examination would take place on 25 September 2010. Harish attached a number of forms from IPG for Sheila’s signature. The forms were blank, with stickers at various locations where Sheila was supposed to sign.

The medical examination took place on 25 September 2010.

Laurence sent a two-page email on 29 September 2010 advising Ahmed on how SCB’s services could meet his objectives and what options were suitable. The email included a seven-page brochure on SCB’s fiduciary services, intended to highlight the benefits of having an offshore trust. Ahmed says that he only flipped through the brochure, as he had already been persuaded by what Laurence had proposed at the 22 September meeting and since he preferred meeting people to reading brochures and documents.

Signing of account opening and other forms in early October 2010

Harish and Laurence met Ahmed to sign the account opening documents. There is a dispute as to precisely when Ahmed signed the documents. SCB initially said that the meeting took place on 10 October 2010. But according to Ahmed’s passport, he was in Iraq from 4 to 15 October 2010. Thus, the likelihood is that the meeting took place at some point before 4 October 2010.

The Plaintiffs submit that SCB’s evidence of what transpired at the meeting should not be believed. This is for a variety of reasons. First, there is a contact report dated 28 September 2010 by Harish which refers to a meeting having taken place at a location where there would have been no buildings at the time. Second, another contact report dated 30 September 2010 by Harish refers to Laurence, rather than Ahmed, getting all the documents signed. Third, Harish’s recollection of the meeting date was inconsistent. Ahmed says that, when the SCB bank forms (that is, the Client Agreement, Client Declaration, Memorandum of Charge and Letter of Indemnity) were signed, no explanation was given to him of the documents. In particular, Ahmed maintains that there was no explanation of what it meant to be a “Professional Client” of SCB.

The Defendants accept that Harish’s contact reports mentioned above do not record that an explanation of what a “Professional Client” entailed was given to Ahmed at the time of signing. Nonetheless, the Defendants say that, according to Ahmed, his practice before signing anything is to ask the person presenting a document to explain the same. SCB submits that Ahmed would therefore not have signed the banking forms without some explanation.

Harish’s affidavit evidence of the signing process was as follows:

Among the documents signed by Ahmed is a Client Declaration in the following terms:

Ahmed also signed a Client Agreement with the following terms:

The bank forms are dated 10 October 2010. The date is written in some (but not all) documents in a different ink (blue) from that used by Ahmed for his signature (black). This indicates that the documents may have been post-dated by Harish after they were executed by Ahmed. The tick (√) in the Client Declaration is in black ink and, contrary to Ahmed’s evidence, is (in my view) likely to have been placed there by him.

I find that in all likelihood Harish did explain to Ahmed that he had to open an account as a “Professional Client” if SCB DIFC was to provide him with services. In such case, Harish would almost certainly have explained to Ahmed what being a “Professional Client” meant and that Ahmed would not be receiving the same protections as a “Retail Client”. Ahmed must have agreed, otherwise he would not have been able to make use of SCB DIFC’s services. Ahmed says that he did not read the relevant bank forms (including the Client Declaration), but simply signed where it was indicated that he should sign. But, following ordinary contract law principles, Ahmed, being an adult of sound mind, should be held bound by his signature and must be taken to have accepted and represented to SCB that he had sufficient net worth and financial understanding to be classified as a “Professional Client”.

By this stage, it was apparent that Sheila, not Ahmed, would be the insured under the envisaged universal life policy. Thus, Ahmed considered that Harish and Laurence would want to meet Sheila.

On 18 October 2010 Harish and Laurence visited Sheila at her house for the purpose of signing documents. Sheila signed the Client Agreement, the Client Declaration, and the Client Investment Questionnaire (“CIQ”). As Sheila was to be the settlor of the insurance trust, she also signed documents for setting up the insurance trust. She chose the name of the trust (the SAHLK Trust) based on her email code password with “S” standing for “Sheila,” “A” for Ahmed, “H” for “Hannah,” “L” for Lana, and “K” for “Kazzaz”.

The parties have differing accounts about what happened at the 18 October meeting. There is a dispute, for instance, about whether Harish and Laurence came by appointment (as they claim) or dropped by unannounced (as Sheila contends). In all likelihood, Harish and Laurence came by appointment. However, it seems to me that nothing turns on that dispute.

The more important difference is whether Harish and Laurence explained the significance of any documents. Sheila says that they did not provide any explanation and did not go through the CIQ with her. According to her, she simply signed where she was told to sign. Harish and Laurence, on the other hand, say that they explained the documents. SCB’s contact report for the meeting does not mention whether or not the documents were explained.

Sheila’s recollection of events is uncertain. She conceded so much at trial:

Her evidence (which I accept) was that in reality she would sign whatever Ahmed instructed her to sign. Whether or not Laurence and Harish turned up at her home unannounced, she was aware that Ahmed wanted her to sign documents that the SCB officers would be bringing to her at some point and for that reason she signed the documents. This would have been the position regardless of whether an explanation of the documents was given or not.

Sheila’s passive attitude at the time is apparent from the following exchange:

In my view, Harish’s account of what actually happened at the meeting with Sheila is likely to be the more reliable. In his affidavit evidence, Harish deposed:

I note that Sheila signed a Client Declaration and Client Agreement in similar terms to those signed by Ahmed. Sheila says that she did not read the terms of those documents and would not have understood them even if she had done so. Nevertheless, as she is an adult of sound mind, she should similarly be held to the terms that she signed.

There is a dispute among the parties in respect of Sheila’s net worth as stated in the CIQ. There her “Estimated Net Worth” and “Estimated Total Liquid Net Worth” were indicated as being US$39.2 million. The same figure appears in a source of wealth memorandum for Sheila that Harish prepared earlier. There are said to be other inaccuracies in the CIQ, such as the value of Ducie Court (said to be around £7 million, instead of just £5.75 million (the price at which the Kazzaz family sold Ducie Court)) and the value of French properties held by the Kazzaz family (said to be around €20 million, in contrast to the range of €7 to €8 million previously recorded by Clive). On 6 October 2010 IPG sent a confidential financial statement to Harish suggesting that Sheila had net assets of US$100 million, an income of US$500,000, and net business interests of US$15 million. Sheila says that, being a retired widow with no income of her own, her net worth could not have been anywhere near US$39.2 million. The Plaintiffs complain that Harish made no attempt to ensure that accurate estimates of the Kazzaz family wealth were stated in the bank and IPG documents.

I make three observations in this connection.

First, when dealing with Sheila’s net worth and source of wealth, SCB clearly did not draw a distinction between the assets and income of Ahmed, Sheila and the ASK Group. SCB treated such assets and wealth as belonging to the Kazzaz family. Thus, the figures in Sheila’s CIQ and other documents were supposed to reflect the Kazzaz family’s wealth as a whole, not just that of Sheila. SCB’s approach in this respect was consistent with the conduct of Ahmed and Sheila. The latter did not distinguish between their individual assets but instead treated the same as the family’s wealth with Ahmed implicitly authorised to deal with the same for the general benefit of the family as a whole. This is evident, for instance, in the following passage from Sheila’s cross-examination:

Second, SCB says that it relied on information about the Kazzaz family wealth that Ahmed provided. As noted above, Ahmed himself had no clear idea about the value of his assets and wealth at the time. Nonetheless, he sent documents (such as the Licence) to SCB which would have conveyed the impression that the Kazzaz family was of substantial means. As we have seen, the Licence alone refers to an undertaking by the Kazzaz family in the order of US$35 million. There is other evidence supporting the inference that the source of SCB’s information was ultimately the Kazzaz family itself. On 30 September 2010 Jyotsna sent an IPG form to Harish requesting information about Sheila Kazzaz’s circumstances, including her income and wealth. Harish forwarded the IPG form to Ahmed who in turn asked Sheila to fill it out. Sheila (or Ahmed using Sheila’s email address) appears to have emailed Pradeep Sankar (“Pradeep”) to complete the IPG form according to the financial statements that Pradeep had for her. At trial, Sheila described Pradeep as a trusted employee mainly responsible for handling accounting and one of the persons who, when Ahmed was in prison (see below), ran the family’s Iraqi business.

Third, as already noted, Sheila and Ahmed are adults of sound mental capacity. They say that they simply signed documents when asked to do so by SCB. According to them, they relied on what SCB’s representatives told them about the documents and at best would only have flipped through the documents without bothering to check the accuracy of the information stated therein about them. In those premises, it seems to me that they must take responsibility for inaccuracies in the factual information about them in the relevant forms. While SCB’s representatives could state what the documents were about, Ahmed and Sheila would have been in the best position to know whether any information about their circumstances (including their income and assets) contained in a document was somehow erroneous. That they did not verify the information themselves does not, in my view, enable them to shunt responsibility onto SCB for inaccuracies about their personal circumstances recorded in the documents, especially where (as seems to have been the case on the evidence) the information appears to have originated from them.

In short, I am satisfied that any inaccuracies about Sheila’s and, for that matter, Ahmed’s wealth information in the various SCB documents originated from the Kazzaz family. Some initial information about Ahmed may have been provided to Harish by Marlon, the ASK Group’s relationship manager with SCB’s SME Division. But it seems to me on the evidence that in all likelihood the source of the information, accurate or not, in SCB and IPG documents was ultimately the Kazzaz family itself.

There is also a dispute over the level of Sheila’s financial sophistication. At trial Sheila portrayed herself as a mere housewife who had assisted her husband in his business by looking after the day-to-day management of Ducie Court which was then run as an accommodation for the homeless. She repeatedly emphasised that, apart from the workings of an endowment mortgage, she had little understanding of financial products. It seems to me that Sheila was too prone to play down her business knowledge and accomplishments. In reality, although retired, Sheila had been involved: (1) in the running of Owens Park Delicatessen in about 1972 and subsequently in a clothes business that she and her husband set up; (2) in the property business that she established with her husband in 1982; (3) as a director of Ducie Court Hotel Ltd and Ducie Court Ltd; (3) as a manager and director of H&L FZE and a director and co-signatory of Financial Links Limited (companies within the ASK Group); (4) as an “investor” for the purposes of her UAE residence visa; and (5) as protector of the Hawksford trusts. When Ahmed was imprisoned (see below), Sheila (with Pradeep’s assistance) monitored the Kazzaz family’s accounts and business and requested that relevant financial information be sent to her. In my view, in light of her previous experiences, Harish could justifiably classify her as a “Professional Client”, namely a person with “sufficient financial experience and understanding to participate in financial markets in a wholesale jurisdiction (such as the DIFC)”.

Events from mid-October to December 2010

On 16 October 2010 Harish sent Ahmed an email attaching financing charts prepared by IPG, based on the offers that IPG had obtained for the Policy from Manulife. Harish asked Ahmed to call him when going through the attachments. Harish explained the financing charts to Ahmed over a call the next day. Manulife had set a deadline of 19 November 2010 for the premium payment to secure the rates of the existing offer as set out in a policy illustration dated 27 October 2010. Ahmed helped to obtain Sheila’s signature on the illustration.

The SAHLK Trust was set up on 1 November 2010. SCTG also sent an application for life insurance on that day. On 2 November 2010 SCTG signed the account opening application form with SCB and applied for credit facilities with SCB.

There is a dispute on whether there was a conference call among the parties on 3 November 2010. According to Harish, there was a conference call between Ahmed, Jyotsna and him to go through the policy illustration dated 27 October 2010. Ahmed could not recall that Harish had ever put him on a conference call with a third person. He says that, if there had been a call with Jyotsna, it had not been made known to him that Jyotsna was also on the line. The Plaintiffs argue that Jyotsna’s contact log for the call on 3 November 2010 was prepared only on 22 March 2011 and so cannot be regarded as a contemporaneous note of the call. Here I accept the evidence of Jyotsna’s contact log. The date “22 March 2011” in the meta-data for the contact log was the “last modified” date for the document on IPG’s database. In all likelihood, the date merely shows the last time when the contact log was accessed and does not mean that the document was only created subsequently.

Meetings in January and February 2011

On 25 January 2011 there was a meeting among Ahmed, Harish, Laurence and Michael. There is a dispute among the parties as to whether Michael might be regarded as independent counsel acting on Ahmed’s behalf. On the facts, I doubt that Michael could be so regarded, given Michael’s close connection with SCB. But I do not think that anything turns on this point. Michael gave advice on the legal structures for the setting up of the envisaged trusts. Ahmed’s evidence (which I accept) is that neither Michael nor Al-Tamimi (a Dubai law firm which SCB introduced to Ahmed) provided legal advice on whether it was necessary or beneficial to hold the Kazzaz family‘s assets in a trust structure.

As at January 2011 Harish had provided Ahmed with two policy illustrations from Manulife, one dated 27 October 2010 and the other dated 11 January 2011. Both showed that an initial death benefit of US$21.5 million was guaranteed until Sheila turned 100. Ahmed’s evidence is that, at the time, he was under the impression that the Policy would guarantee the death benefit up to Sheila attaining the age of 100. Ahmed says that, for that reason, when Harish asked to see Sheila on 1 February 2011 for her to sign the 11 January illustration and Sheila had checked with Ahmed if it was fine for her to sign, Ahmed had no objection. Sheila consequently signed the 11 January 2011 illustration.

On 2 February 2011, Ahmed emailed Harish as follows:

Ahmed’s letter (emailed on 5 February 2011) authorising SCB to disclose Ahmed’s personal information to Walid Fattah (“Walid”) describes the latter as Ahmed’s “financial adviser”. Ahmed signed the authorisation letter after clearing the text with Walid. The meeting with Walid took place on 6 February 2011. Naushid attended. At the pleading stage, Ahmed had accepted that he was also at the 6 February meeting. But it has become clear from the entries in Ahmed’s old Iraqi passport showing that Ahmed was in Iraq from 28 January to 24 February 2011, that Ahmed would have been in Iraq at the time.

After the meeting, Walid sent an email (with the subject heading: “SC feedback to be read when YOU ARE CONCENTRATED”) to Ahmed on the same day as follows:

There is no contact report for the 6 February 2011 meeting. The Plaintiffs complain that at the 6 February meeting no mention was made of the following:

(a) The possibility of margin calls being required if the investment portfolio did not generate sufficient returns to cover interest payments on the premium loan or if there was insufficient collateral for the premium loan due to a drop in value of the Policy.

(b) The fact that the annual interest payments on the premium loan would be around US$250,000 per year.

Nonetheless, Walid’s email as well as some undated presentation slides used at the 6 February 2011 meeting give a flavour of what was discussed at that time. The undated presentation slides refer (among other matters) to the following:

There is a dispute among the parties as to whether Ahmed and Walid met with Laurence and Harish on 23 February 2011. On this, I agree with the Plaintiffs that, on the evidence, in particular Ahmed’s old Iraqi passport, it is unlikely that there was such a meeting.

All sides agree that there was a meeting among Ahmed, Harish, Laurence, Naushid and Walid on 28 February 2011. According to Ahmed, all that was mentioned at this meeting was that there would be minor changes to the envisaged policy and a reduction in the premium. According to Ahmed, it was said that these changes would not affect the benefit that the life insurance would bring. SCB says that the use of premium financing, monthly interest payments, and the possibility of margin calls were discussed at this meeting.

To my mind, an email dated 1 March 2011 from Harish to Walid (copied to Ahmed among others) is the most reliable evidence of what must have been discussed at the meeting on the previous day. The email states:

The email was sent at noon. It is unlikely that everything stated in the email could have been negotiated with Manulife overnight between the time of the meeting on 28 February and noon on the following day. The email refers to “our conversation with Ahmed yesterday”. It refers to matters which Walid (and presumably Ahmed to whom the email has been copied) are already supposed to “know”. The tenor of the email suggests that the matters there had already been discussed in detail and are merely being summarised in the email. The email specifically refers to the death benefit being changed, following negotiation, from age 100 years to 85 years (as opposed to age 80 years). The email also refers to the required “collateral” and “client equity”. Further, reference is made to Harish “monitor[ing]” the value of the policy on a monthly basis and, if growth is less than 3%, to “assess[ing]” alternative options. The email also refers to “AK’s (that is, Ahmed’s) concern of below-expectation returns”. All of the foregoing matters suggest that Ahmed voiced such concern over lower than expected returns at the 28 February meeting.

In short, contrary to Ahmed’s recollection at trial, the email does point to (1) margin financing, in particular the possibility of calls being required if there was insufficient collateral for the premium loan due to a drop in client equity or the value of the Policy, (2) the size of the premium, and (3) the need to monitor the value of the envisaged policy on a monthly basis, having all been discussed at the 28 February meeting.

Events from March to December 2011

The Policy was issued on 11 March 2011.

Laurence and Jyotsna visited Sheila at her villa on 21 March 2011. There is a dispute among the parties as to whether Jyotsna explained to Sheila the “Free-Look” period and the death claims process. Sheila did not recall even meeting Jyotsna. Jyotsna’s contact log for the meeting (prepared on 22 March 2011) mentions that policy illustrations were shown to Sheila at the meeting and subsequently emailed to her. Mention is also made in the contact log to the “Free Look” period and the death claims process having been discussed. The Plaintiffs say that the entries in the contact log are implausible. But it seems to me that this contemporaneous contact log is reliable evidence as to who visited Sheila and what actually happened during their visit.

Ducie Court was sold in March 2011 for £5,313,195.53 (less bank charges) and the proceeds were deposited with SCB between March and May 2011.

On 15 March 2011 Harish emailed Ahmed as follows:

On 21 March 2011 Harish sent a Client Advisory Proposal to Ahmed. The proposed allocation was for 84% of the Ducie Court sale proceeds to be invested in fixed income assets and 16% to be invested in equities. The total average coupon cashflow from bonds per annum was expected to be £127,125. Harish asked Ahmed for feedback when they met on 24 March 2011. But at the meeting Ahmed told Harish that he was not able to make investment decisions himself and would be guided by the advice and recommendations of SCB.

Ahmed subsequently took out a total of US$4 million in loans against the value of the portfolio for use in his Iraqi business. Ahmed says that he took out these loans because he had been assured by the Defendants that his business needs would be met by the arrangement that had been put in place. The loan amounts were drawn down as follows:

(a) 29 March 2011: US$850,000

(b) 31 March 2011: US$650,000

(c) 21 April 2011: US$1,000,000

(d) 18 May 2011: US$500,000

(e) 30 May 2011: US$500,000

(f) 16 June 2011: US$500,000

The loans were transferred to the ASK Group account with SCB.

On 12 May 2011 after Ahmed’s request for a transfer of US$ 1 million, Harish wrote to him:

On the same day Ahmed wrote back to Harish:

On 14 May 2011 Harish replied:

In the meantime, in May 2011, Sheila found a suitable London flat (the Westchester Property) for purchase by the Kazzaz family. Ahmed informed SCB of this by email dated 20 May 2011. Ahmed wrote:

According to Ahmed, Laurence and Harish proposed that Ahmed use a mortgage to purchase the Westchester Property. Ahmed agreed to obtain a mortgage from SCB even though he believed that he had sufficient cash to purchase the Westchester Property outright and negotiations had been carried out on the basis of a “cash purchase without requiring financing” and the seller was not happy with the introduction of a mortgage. Ahmed further says that he assumed that the mortgage would be a long-term fixed loan like the standard 25-year mortgages to which he had been accustomed in England. According to Ahmed, he did not realise (and it was not made clear to him) that the mortgage was actually made under a fixed advance of up to 12 months which could be reviewed at SCB’s discretion.

On 26 June 2011 Ahmed emailed Harish as follows:

Harish emailed Ahmed on 28 July 2011 as follows:

The mortgage took the form of a loan facility to ASK Three Limited, one of seven companies (including Financial Links Duty Free Limited, KAR Motors Limited, ASK One Limited and ASK Two Limited) incorporated in 2011. The loan facility letter was attached to Ahmed’s email. It offered to provide two facilities. Facility 1 in the amount of US$100,000 and Facility 2 in the amount of US$2,115,000 or 75% of the current market value or purchase price of the Westchester Property. Facility 2 was stated to be in the form of “Fixed Advances of up to twelve (12) months”. In respect of Facility 2, the letter stated that:

The loan facility was to be secured (among other collateral) by a “First legal all monies mortgage on the Property to be executed by Ask Three Limited”. The letter also provided:

By email dated 28 July 2011 Ahmed sought Walid’s advice before accepting the facility letter’s terms. Walid emailed back:

It seems to me, on the basis of Harish’s email pointing out the terms of the facility letter, that Ahmed knew or ought to have known what the mortgage entailed. He cannot now claim to be surprised by the terms that he accepted such that, as a result, the terms agreed should not be treated as binding.

The Kazzaz family’s offer to buy the Westchester Property was accepted on 24 May 2011. The consideration was £1,750,000. The purchase was completed on 31 August 2011.

On 18 July 2011 Harish wrote to Ahmed:

Ahmed sent back two signed redemption forms on 27 July 2011. Harish replied:

Trusts were set up as follows:

(a) SAHLK Trust: 1 November 2010

(b) ASK Star Trust: 19 May 2011

(c) ASK Trust: 19 August 2011

The trustees of the various trusts were SCTG and SCTC. Ahmed says that he was unaware that the ASK Trust and ASK Star Trust were to hold the family assets and the SAHLK Trust was to hold the Policy. Ahmed further claims that, beyond those details, he was unaware of the details of each trust or the rationale behind their set-up. Although there is an email from Ahmed to Michael in which he expressed his views on the proposed trust structures, Ahmed’s evidence is that he was only repeating advice that Laurence and Michael had given him previously. Even when he commented on wanting to have a “modern reserve powers discretionary trust rather than a discretionary trust which is the only way I wish to proceed,” Ahmed maintains that he was merely stating what Clive or Laurence had told him previously.

I find this evidence of Ahmed difficult to accept. In the same email to Michael, he states:

Read as a whole, the email does not appear to be from a person who was merely parroting (without comprehending) what others told him to say. On the contrary, the email suggests that Ahmed fully understood (and agreed with) the underlying rationales for the trust structures which SCB created on his instruction. The email is also evidence that Laurence, Clive and Michael had provided Ahmed with detailed explanations as to why the various trusts were being set up and what assets they were supposed to hold.

On 11 September 2011, Harish wrote to Ahmed:

According to Ahmed, in mid-2011, SCB did not alert him to the possible impact on his investment portfolio of his withdrawals from the Ducie Court proceeds. Ahmed’s case is that, even at this stage, there was no suggestion that the investment portfolio might not generate sufficient returns to cover the interest payments on the premium loan and the mortgage. Ahmed’s evidence is he was reassured by Harish that everything was fine.

I am unable to accept Ahmed’s evidence on this.

First, as SCB submits, it is not credible for Ahmed to say that he believed that he could take out US$4 million (from a portfolio of just over US$8 million) without affecting investment returns from his portfolio. There is no evidence that SCB represented to him that his business needs for an indefinite amount would be met. Ahmed himself observed that Harish always told Ahmed that his investment positions were very tight each time he wanted to make a withdrawal. For instance, Ahmed complains in his affidavit evidence that “Harish’s response to my request for transfer of funds was always that there were insufficient funds”.

Second, Ahmed relies on the undated presentation slides used at the 6 February 2011 meeting having referred to the investment portfolio providing for “cash availability at any time”. Ahmed claims to have understood this to mean that he could withdraw funds at any time for his business needs. But that does not seem to me to be a reasonable reading of the presentation slides. As a matter of common sense, the fact that cash could be made “[available] at any time” can hardly be reasonably understood to mean that one can withdraw any amount up to possibly the total invested at any time and still be able to meet one’s regular premium and mortgage loan payments. Ahmed would at least have understood that the investment portfolio was supposed to generate returns from which the premium and mortgage loans could be met. It would obviously follow from this that, the lesser the amount invested in the portfolio as a result of withdrawals by Ahmed, the lesser the amount that the portfolio could generate and consequently the less likely that the returns from the portfolio would be able to meet the regular premium and mortgage loan interest payments. In those circumstances, it could hardly be surprising that SCB would be looking to Ahmed to make up any shortfall with cash or margin calls. By the loan facility letter of 28 July 2011, for instance, the client (Ahmed) specifically undertook that “he will at all times, maintain the Aggregate Collateral Value of the Security above or equal to the Equivalent Amount of the Total Outstandings”.

Third, as just mentioned, the loan facility letter of 28 July 2011 refers to “collateral value of security”. There are other references to “collateral” in Harish’s communications to Ahmed. There does not appear to be an email from Ahmed requesting Harish to explain what such references to “collateral” were supposed to mean. That suggests that in all likelihood Harish did explain to Ahmed what was meant by “collateral” and, despite what he now says, Ahmed understood the concept of “collateral” at the time. Indeed, where there were matters that he felt he did not understand, Ahmed took the precaution of consulting Walid and obtaining Walid’s clearance before proceeding.

Events from 2012 onwards

In February 2012 Ahmed was arrested in the US. On 29 October 2012 he was sentenced to 15-months’ imprisonment in the US for conspiracy with two other persons to defraud on the basis that he had offered bribes in Iraq to procure a sub-contract and its continuation with a US corporation. The period of his incarceration was a difficult time for the Kazzaz family. Nonetheless, during this time, SCB continually requested funds to settle outstanding interest payments on the premium and mortgage loans. There were also regular invoices for trust fees. Ahmed complained about SCB’s constant demands for payment which he characterised as “a bottomless pit”. He became increasingly unhappy with the Defendants.

On 23 July 2012 Rohit Sharma (“Rohit”) (SCB DIFC’s Head of Investment Advisory) emailed Ahmed:

Harish responded in similar fashion a week later. However, Ahmed became frustrated with SCB. On 28 August 2012, at Ahmed’s request, Marlon replaced Harish as Ahmed’s relationship manager.

The foregoing sequence of events proved to be a stressful time for the Kazzaz family. The Plaintiffs say that the emotional toll led to Sheila (who had previously suffered from depression) experiencing a relapse in November 2016.

Ahmed requested a tele-conference call with SCB and the representatives of the SCTG to discuss whether it was worth keeping the Policy and the available options for financing the premium loan. The conference took place on 25 May 2016 involving the Plaintiffs and representatives of SCTG. Nevertheless, on 2 June 2016 SCTG requested additional securities or payment of about US$450,000 by 15 June 2016. Ahmed accordingly decided that it would be better to find alternative financing for the Policy. But he was unable to do so. On 8 December 2016 Ahmed was notified that SCB had surrendered the Policy. He later understood that the surrender value was US$12,801,778.89, with a shortfall of US$1,225,267.80 recovered through enforcement of a pledge over ASK One’s assets.

By letter dated 14 September 2016 SCB confirmed that the mortgage loan taken out by ASK Three for the Westchester Property would be extended to 30 September 2016. Ahmed sold an Iraqi property (“the Salim Property”) on 10 October 2016 to raise funds and avoid the Westchester Property (where Lana was living) being sold by SCB. On 17 January 2017 Ahmed redeemed the mortgage over the Westchester Property.

The Plaintiffs say that, by reason of the foregoing facts and matters, they are entitled to the following financial relief: (1) US$1,076,857.81 as the interest on the premium loan, (2) US$1,225,267.80 to cover the shortfall on the surrender of the Policy, (3) £141,913.64 as the additional incurred in purchasing the Westchester Property by means of a mortgage instead of cash, (4) US$1,500,000 from the forced sale of the Salim Property to redeem the mortgage, and (5) US$178,983.66 as fees paid to SCTG and SCTC.

Summary

The Plaintiffs invite me to find as follows on the basis of the facts and matters reviewed above:

(a) The Defendants did not take any steps to verify the Plaintiffs’ net worth, income, access to cash or investment profile before onboarding them as Professional Clients and advising them on the suitability of the PFA.

(b) The Defendants represented to Ahmed that he did not need to worry about reviewing the documents required to implement the PFA as they would take care of it for him and his family. They knew that Ahmed approved Sheila’s signing of documents on this basis.

(c) The Defendants did not explain or highlight the purpose, features and risks of the PFA and being a Professional Client to the Plaintiffs. This included the purpose of the trusts structures, the possibility of currency risks, margin calls and interest payment arising from the proposed financing, and the net death benefit of the Policy being guaranteed for only 16 years and 6 months (ie. until Sheila turned 86), and not until Sheila turned age 100.

(d) The Defendants represented and assured Ahmed that the returns on investments would cover the interest payments for the premium loan and the mortgage.

(e) The Defendants represented to Ahmed that he could obtain funds for his business needs under the PFA. When Ahmed requested funds for his business needs, he was not told of the possibility that the investments may not generate enough returns to cover the costs of maintaining the PFA.

In light of the survey of the facts and evidence in this section, I am unable to find that the Plaintiffs have made out the matters that they submit I should find. On the contrary, based on the review of evidence in this section, I make the following findings on the evidence:

(a) SCB (including Harish, Laurence and Naushid) obtained its information about the Kazzaz family wealth and income from Ahmed himself. Ahmed did not really have any idea of his net worth and assets at the time. He most likely dealt with broad-brush figures. But, from the Licence alone, SCB would understandably have had the impression that the Kazzaz family had significant wealth and assets, such that the family was in a position to undertake to the Iraqi government that Leadstay would invest US$35 million in a development.

(b) SCB through Harish and Laurence in particular explained the purposes, features and risk of what the Plaintiffs have called the PFA. At trial SCB argued that it never put forward a PFA to Ahmed, but instead suggested possible solutions from time to time for Ahmed’s evolving needs. Nonetheless, the evidence suggests that SCB discussed with Ahmed the putting together of a package of services that could cater to the needs of the Kazzaz family. That package included among its elements: (i) the purchase of the Policy, (ii) the sale of Ducie Court, (iii) use of the sale proceeds from Ducie Court to create an investment portfolio, (iv) the purchase of a London property through a mortgage, (v) the payment of the premium and mortgage loans from the returns generated by the investment portfolio, and (vi) the establishment of trusts to hold Kazzaz family assets, such as the Policy and the ASK Group’s Iraqi assets. The evidence indicates that SCB through Harish and Laurence explained the rationale underlying the trust structures, the possibility of currency risks and margin calls, and interest payment arising from the proposed financing. Ahmed was told that the net benefit of the Policy would only last until Sheila turned 85 and not until Sheila turned 100.

(c) The Defendants did not represent to Ahmed that the financial arrangements that SCB would put in place would take care of the Kazzaz family’s needs, regardless of how much Ahmed withdrew from the investment portfolio. In particular, SCB represented that the investment portfolio could generate returns that would pay off the interest due on the premium and mortgage loans. But SCB did not represent that the investment portfolio could generate sufficient returns to meet such interest payments, no matter how much moneys Ahmed withdrew from the investment portfolio. SCB through Harish, Laurence and Naushid did say that cash could be readily available. But this did not mean (and could not reasonably have been understood to mean) that Ahmed could withdraw as much cash as he wished from the portfolio whenever he wanted, without impairing the portfolio’s ability to generate returns that would be sufficient to meet the interest payments due on the premium and mortgage loans. What Harish, Laurence and Naushid meant by cash being available was that, when cash was urgently needed, the portfolio’s investments could be readily liquidated to meet such needs.

(d) I do not accept the complaint in Ahmed’s email dated 26 June 2011 that, as a matter of practice, SCB (whether through Harish or Laurence) would simply put documents before Ahmed for signature without explanation. What is stated in that email is contradicted by the documentary evidence in this case, from which it would appear that in practice Harish and Laurence would take pains to deal with points raised by Ahmed from time to time.

(e) I find that SCB explained to Ahmed and Sheila what it meant to become SCB’s Professional Client and were justified in classifying them as such.

Legal Analysis

In this section, I consider the Plaintiffs’ claims of negligent misrepresentation, breaches of the common law duty of care, and breaches of the DIFC Regulatory Law in light of my findings of fact above.

Negligent misrepresentation

The misrepresentations are alleged to have occurred in Dubai. Where a foreign tort is involved, Singapore law applies a double actionability test. See Rickshaw Investments Ltd v Nicolai Baron von Uexkull [2007] 1 SLR(R) 377, at [53]. Essentially, the conduct of which complaint is made must be actionable as a civil wrong in the place where it was committed and actionable as a tort in Singapore. Misrepresentation is actionable as a tort in Singapore. The Defendants accept that misrepresentation would be actionable as a civil wrong under Dubai or DIFC law. It follows that the double actionability test is met. In that case, the court essentially applies the law of the forum (that is, in this case, Singapore law) in evaluating whether as a matter of fact there has been a misrepresentation for which damages may be claimed. Accordingly, subject to a question about the extra-territorial application of the MA (see below), I should apply Singapore law when determining whether SCB is liable for negligent misrepresentation.

Under Singapore law, two types of situations may be distinguished for the purposes of analysing whether there has been negligent misrepresentation.

The first situation is what might be referred to as the statutory paradigm. That is where: (1) a defendant makes a representation of present fact or law (as opposed to a prediction about the future) to a plaintiff, (2) the representation is false, (3) the representation induces the plaintiff to enter into a contract with the defendant, and (4) the plaintiff suffers loss as a result. This paradigm is typically actionable under the MA. For instance, in relation to a negligent misrepresentation which induces a plaintiff representee to enter into a contract with a defendant representor, MA s 2(1) provides:

It will be noticed that s 2(1) only applies where a person (the plaintiff) has entered into a contract after a misrepresentation has been made “by another party thereto”, that is, by another party to the relevant contract.

The second situation is what might be referred to as the general paradigm. That is where: (1) a defendant makes a representation of present fact or law (as opposed to a prediction about the future) to a plaintiff, (2) the representation is false, (3) the false representation induces the plaintiff to enter into transaction (not necessarily contractual) with a third party, and (4) the plaintiff suffers loss as a result. This general paradigm is actionable at Singapore common law pursuant to the leading case of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL). In such situation, a plaintiff must establish that, taking account of all circumstances, the defendant owed a duty to take reasonable care when making the relevant representation to the plaintiff. For example, there would be such a duty where it is plain that a “party seeking information or advice was trusting the other to exercise such a degree of care as the circumstances required”: Hedley Byrne, at 486 per Lord Reid. As far as negligent misrepresentation is concerned, the general paradigm overlaps with the statutory paradigm in the situation where the third party and the defendant are the same person: the defendant makes a negligent misrepresentation which induces the plaintiff to enter into a transaction (a contract) with the defendant. The statutory paradigm merely requires the defendant representor to have taken reasonable care in the making of a representation. MA s 2(1) does not stipulate that the defendant representor must be shown to have owed a duty of care to the plaintiff representee. That may be because the defendant in the statutory paradigm can be presumed to owe a duty of care to the plaintiff when making the impugned representation, since that representation will have been intended by the defendant to induce the plaintiff to enter into the relevant contract with the defendant.

The Plaintiffs have run alternative cases based on the statutory and general paradigms. Although there are similarities between the two paradigms, there are also differences between them. Hedley Byrne addressed the difficulty that, until the decision in that case, it had not been thought possible to recover damages for pure economic loss in an action for the tort of negligence. On the other hand, the MA addressed the difficulty that at common law it was only possible to bring an action for deceit (that is, fraudulent misrepresentation). It was possible in equity to seek relief for innocent misrepresentation. But the equitable relief was limited to rescission, as opposed to damages. The MA created a statutory action for negligent misrepresentation. The MA did so by providing that where a misrepresentation has been made, the burden is on the representor to show that he or she “had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true”. In other words, by contrast with the general paradigm, when the MA is invoked, the burden is on the defendant, once the plaintiff has shown that a false representation was made, to adduce evidence that he or she took reasonable care when making the impugned representation. This apparent reversal of the normal evidential burden of proof has led legal commentators to suggest that, where there is an overlap between the statutory and general paradigms, a plaintiff should tactically opt to frame his or her action within the statutory paradigm as the burden would then be on the defendant to show evidence of having taken reasonable care. Otherwise, under the general paradigm, the burden will be on the plaintiff to show that a defendant failed to take reasonable care in making a representation. See RBC Properties Pte Ltd v Defu Furniture Pte Ltd [2015] 1 SLR 997, at [63]–[66].

There is a further difference upon which legal commentators have focussed. Read literally, MA s 2(1) seems to provide that, where negligent misrepresentation has been established, the defendant will be “liable to damages in respect thereof had the misrepresentation been made fraudulently”. It has consequently been suggested that the more liberal measure of damages that the common law allows where the tort of deceit has been established, will equally apply to negligent misrepresentation under MA s 2(1). See, for example, Royscot Trust Ltd. v Rogerson [1991] 2 QB 297 (CA) in which Balcombe LJ expressed the view (at 301) that, where there has been negligent misrepresentation under the English equivalent of the MA, a victim is “entitled to recover ... all the losses ... suffered as a result of its entering into the agreements ... , even if those losses were unforeseeable, provided that they were not otherwise too remote”. However, I am sceptical of this supposed difference. As a matter of principle, it would be wrong for a person who was merely negligent to be treated as if he or she had acted fraudulently. In Singapore, Balcombe LJ’s view has recently been queried by the Court of Appeal in RBC Properties at [83]–[85]. Nevertheless, as neither party has pursued this argument in their submissions, it is unnecessary for me to do more than flag that there is an ongoing debate on the remedial scope of MA s 2(1).

There may be yet another difference between the two paradigms. I am far from convinced that the MA is applicable in the present circumstances where the alleged misrepresentations would have taken place not in Singapore, but in the DIFC. In JIO Minerals FZC v Mineral Enterprises Ltd [2011] 1 SLR 391, the Court of Appeal held (at [104]):

In light of the foregoing, I doubt whether, when the double actionability test is met in respect of a tort committed outside Singapore, the court here can apply statutes such as the MA that do not have extra-territorial effect. The Plaintiffs cited JIO Minerals for a different proposition and have not discussed the conflict of laws issues that I have just highlighted. The Defendants have not challenged the applicability of the MA on the basis of the dictum that I have quoted. Accordingly, having heard no argument on the matter, I will leave the point for discussion in future cases. I will simply assume (without necessarily accepting) for the purposes of this judgment that the MA is applicable to the alleged misrepresentations here.

I start (as the Plaintiffs have) with a Hedley Byrne analysis. For this purpose, I will proceed on the basis that the Defendants owed a duty of care to the Kazzaz family when making representations to them in relation to the services that SCB could provide. Given that, on behalf of the Kazzaz family, Ahmed was plainly “seeking information or advice” and was “trusting the other [SCB and its officers] to exercise such a degree of care as the circumstances required”, it would be difficult in my view to maintain that SCB owed no duty of care at all to the Kazzaz family on the facts.

It will be seen from my findings above that, in relation to Alleged Misrepresentation (1) (see [6(c)(i)] above), SCB (whether through Laurence, Harish, Naushid or anyone else) did not represent that the financial arrangements that they were proposing would be self-funding so that the investment portfolio put together from the Ducie Court sale proceeds would generate sufficient returns to meet the interest payments for the premium and mortgage loans in all circumstances and, in particular, regardless of the amounts withdrawn by Ahmed. All that was represented to Ahmed was that an investment portfolio could be put together out of the Ducie Court proceeds that would generate returns to cover the interest due on the premium and mortgage loans.

I have so far treated Alleged Misrepresentation (1) as a representation of present fact, rather than merely a statement of opinion or a prediction of what might happen in the future. But in actuality the statement that the PFA would generate sufficient returns is in form a statement about what is likely to happen. It is not so much a statement of present fact as a statement of belief or opinion about the future. It would therefore be more accurate to treat the alleged misstatement as an implicit representation that the maker knew of facts that might reasonably have led the maker to believe that the proposed financial arrangements could generate sufficient returns to cover the relevant interest payments in the future. The question would be whether Harish reasonably believed when making the proposal to Ahmed that the investment portfolio that SCB was going to put together for the Kazzaz family had the potential to generate sufficient returns to cover the interest on the premium and mortgage loans.

On this, Harish’s evidence when cross-examined by the Plaintiffs’ counsel (Mr. Chia) was as follows:

Harish continued:

It seems to me on the evidence that Harish did not expect Ahmed to make substantial withdrawals from the investment portfolio and thereby seriously hamper the portfolio’s ability to generate sufficient returns to cover the interest on the premium and mortgage loans. I do not believe that was an unreasonable assumption on Harish’s part. The portfolio would have to generate returns of about 5% from nearly the entire of the Ducie Court sale proceeds if it was to have any prospect of wholly or even substantially covering the interest due on the premium and mortgage loans. In this sense, the contemplated arrangement would have been a “tight” package with little room to manoeuvre if (as eventually happened) Ahmed withdrew significant amounts. But Ahmed’s withdrawals did not render it unreasonable for Harish when first proposing the arrangement to Ahmed to believe that an investment portfolio could be put together out of the Ducie Court proceeds which would generate sufficient returns to meet the interest payments on the premium and mortgage loans. I do not think that Harish was at fault in making the implicit representation described above.

Further, on Alleged Misrepresentation (1), I have not found that SCB (whether through Laurence, Harish, or Naushid) represented that Ahmed would never have to provide further funds as security for the premium loan or the mortgage. On the contrary, SCB (especially through Harish) informed Ahmed of the need to provide collateral security. For instance, the loan facility letter of 28 July 2011 (the terms of which Harish specifically asked Ahmed in his cover email to refer to) expressly referred to the client’s undertaking to “at all times, maintain the Aggregate Collateral Value of the Security above or equal to the Equivalent Amount of the Total Outstandings”. Before accepting the same, Ahmed asked Walid for advice on the terms of the letter and only acted upon receiving Walid’s positive recommendation.

It follows that Alleged Misrepresentation (1) has not been made out on the facts. In any event, it seems that whatever SCB stated was not causative of Ahmed’s entry into financial arrangements with SCB, Ahmed having cleared matters with Walid on at least two occasions before taking specific steps.

In relation to Alleged Misrepresentation (2) (see [6(c)(ii)] above), I have not found that SCB (whether through Laurence, Harish, or Naushid) represented to Ahmed that he need not review, understand or seek professional advice in respect of any documents to be executed. Instead, SCB (especially through Harish) not only recommended professionals (albeit connected with SCB) from whom Ahmed (if he wished) could seek advice, but also accommodated Ahmed’s wish for the proposed arrangements on the Policy and its financing to be explained to Walid, so that Walid could in turn explain the same to Ahmed. At no time, as far as I can see on the evidence, did Harish, Laurence or Naushid tell Ahmed that he could not (or should not) seek professional advice on his own.

Alleged Misrepresentation (2) likewise fails on the facts.

In relation to Alleged Misrepresentation (3) (see [6(c)(iii)] above), what is or is not “suitable” is a matter of opinion, not a statement of present fact or law. However, the alleged representation is in effect an implicit statement that Harish and Laurence knew of facts that might reasonably have led them to conclude as a matter of opinion that the proposed arrangements were suitable for the Kazzaz family.

The evidence suggests that Harish and Laurence did indicate to Ahmed that in their view the arrangements being proposed by SCB were suitable for the Kazzaz family’s needs. Those arrangements included purchasing the Policy by way of a premium loan, purchasing the Westchester Property by means of a mortgage, using the Ducie Court sale proceeds to establish an investment portfolio out of which the interest on the premium and mortgage loans could be paid, and establishing trust structures to hold Kazzaz family assets.

In response to my questions on the object of all SCB’s proposed financial arrangements, Harish said:

In short, Harish believed that the arrangements proposed were suitable because: (1) the investment portfolio put together from the Ducie Court proceeds would generate capital growth for the Kazzaz family in the long term, (2) the death benefit from the Policy would provide a degree of security in the longer term, (3) Kazzaz family assets injected into trust structures would be ring-fenced from forced heirship under French and shari’a law, and (4) the interest payments on the premium and mortgage loans would be met by the income generated by the investment portfolio. I am unable to say that such view was unreasonable.

The Plaintiffs submit that it was unreasonable for Harish to regard the proposed financial arrangements as suitable for the following reasons:

(a) The arrangements were not suitable for a person of Ahmed’s risk profile.

(b) The arrangements were not suitable for a person of Ahmed’s investment experience and knowledge.

(c) The arrangements were not suitable for a person of Ahmed’s net wealth, income and access to cash.

I am unable to agree.

For those reasons, Alleged Misrepresentation (3) also fails. The Plaintiffs’ Hedley Byrne-based case on negligent misrepresentation is consequently rejected as a whole.

The Plaintiffs also rely on negligent misrepresentation under the MA s 2(1), Alleged Misrepresentations (1), (2) and (3) being said to have induced the Plaintiffs to enter into various contractual arrangements with SCB. On the assumption that the MA applies, it must nonetheless follow from my rejection of Alleged Misrepresentations (1), (2) and (3) that the claim based on s 2(1) cannot succeed. That claim is also rejected.

Breaches of the common law duty of care

The Plaintiffs’ case is that a duty of care was owed by the Defendants to the Plaintiffs by reason of the following:

(a) It was foreseeable that the Defendants’ failure to exercise reasonable care when advising the Plaintiffs on the components of the PFA would cause the Plaintiffs loss.

(b) There was sufficient legal proximity for a duty of care to arise due to SCB having assumed responsibility to take reasonable care when providing advice to the Plaintiffs and the Plaintiffs having correspondingly relied on the Defendants for that purpose.

(c) The regulatory obligations imposed on SCB under the Dubai Financial Services Authority Rules (“the DFSA Rules”) concretises the nature of the Plaintiffs’ duty of care.

The Plaintiffs stress that it was reasonable for them to rely on the Defendants, because Ahmed and Sheila were financially unsophisticated and had little or no experience of trusts. Clause 3.1(d) of the Client Agreements between the Plaintiffs and SCB stated that SCB DIFC did not owe any advisory, fiduciary or similar duties to the client. Clause 13 of the same document stated that SCB would not be liable for any loss suffered or incurred by the client arising in connection with any advice or recommendation under the agreements or any management of assets. But the Plaintiffs submit that such provisions are not applicable, because the clauses are ambiguous and should be construed contra proferentem (that is, against SCB insofar as SCB is seeking to rely on those clauses). In particular, the Plaintiffs say that the clauses do not apply since the Plaintiffs were wrongly classified as “Professional Clients” by SCB. Under the Client Agreements, investment advice and services were provided on the basis that the Plaintiffs were “Professional Clients” as defined in the DFSA Rules. Likewise, clauses 3.1(d) and 13 of the Client Agreements must have been premised (the Plaintiffs contend) on Ahmed and Sheila actually being Professional Clients. The clauses should not be treated as operative where the Plaintiffs are not actually Professional Clients. The clauses should not operate against clients who are inexperienced in financial and banking matters and would not fully have appreciated the impact of what they were agreeing to when they signed the Client Agreements.

I will again proceed on the basis that the Defendants owed a duty of care to the Plaintiffs. Nonetheless, it will be seen that, purely on the facts, I have found against the Plaintiffs in relation to Alleged Breaches (1), (3), (4), (5) and (6) of the common law duty of care (see [7] above). Thus, the Plaintiffs’ claims based on Alleged Breaches (1), (3), (4), (5) and (6) must fail in any event.

In relation to Alleged Breach (2) (failure to advise on currency risk), the Plaintiffs contend that no such advice was given until an email from Rohit dated 12 July 2012. The email reads:

Upon receipt of Rohit’s message, Ahmed emailed Walid on the same day as follows:

Harish’s affidavit evidence on currency risk was as follows:

In cross-examination, Harish said the following:

What I derive from the foregoing evidence is that Rohit at Harish’s request had proposed that a US$ investment portfolio be put together out of the Ducie Court proceeds which were denominated in pounds sterling. Rohit did so because the premium and mortgage interest payments were denominated in US$. Rohit thought that a portfolio in US$ would minimise the cross-currency risk. This would require the Ducie Court proceeds to be converted into US$ at the outset, before a portfolio was put together. Rohit explained this to Ahmed. But, as Harish noted in his email to Ahmed of 15 March 2011 (see [90] above), Ahmed’s instruction was to keep the Ducie Court proceeds in pounds sterling and not to convert the same into US$.

I do not regard Ahmed’s email to Walid of 12 July 2012 (see [154] above) as compelling or any evidence that Ahmed did not understand currency risk, as opposed to a complaint that Ahmed was unhappy about the number and extent of margin calls that SCB was making and regarded SCB’s explanations for the same as little more than obfuscatory jargon. It is difficult to believe that an experienced businessman such as Ahmed with assets and interests in England, France, Dubai and Iraq would not understand basic concepts of foreign exchange and currency risk.

I also note that the Risk Disclosure Statement which Ahmed signed when opening a client account with SCB contained the following term:

In short, contrary to the Plaintiffs’ contention, I find that SCB did explain the currency risk to Ahmed and Ahmed understood the currency risks involved.

Alleged Breach (2) is not made out on the facts.

In relation to Alleged Breach (7) (failure to explain the significance of being a Professional Client and to assess the suitability of Ahmed and Sheila to be such), I have already found at [55] above that SCB through Harish explained to Ahmed and Sheila the significance of being a Professional Client and the consequences of not being a Retail Client. I have also found that SCB acted reasonably in classifying Ahmed and Sheila as Professional Clients. But I need to say a little about the Plaintiffs’ allegation that SCB had no justifiable basis for classifying Ahmed and Sheila as Professional Clients in the context of Rule 2.5.1 of Conduct of Business Module B (“COB”) of the DFSA Rulebook.

COB Rule 2.3.2(1) provides:

COB 2.5.1(1) states:

The Guidance to COB 2.5 explains:

According to the Plaintiffs, in light of the COB, SCB had no reasonable grounds for considering that Ahmed or Sheila had sufficient experience or understanding to be classified as “Professional Clients” because of the following:

(a) Ahmed did not have sufficient experience or sophistication to understand the financial investments such as the PFA and his limited experience was confined to the real estate market.

(b) Sheila’s evidence was that she was risk averse and had limited knowledge of the real estate market and was evidently not sufficiently sophisticated to understand the risks of investing in complex financial investments.

(c) Neither Ahmed nor Sheila had ever acquired life insurance policies as investments, let alone through a geared structure supported by an investment portfolio.

I am unable to agree.

Under COB Rule 2.5.1(1)(a) what SCB had to assess was the knowledge and understanding of Ahmed and Sheila relative to the proposed transactions that they would be entering into with SCB. Those particular transactions (the Policy, the mortgage, trust structures) were not such complex or risky arrangements that Ahmed did not, or could not, understand or appreciate the risks being undertaken. For instance, both Ahmed and Sheila accepted that they were familiar with endowment mortgages. Such mortgages are usually tied with a life insurance policy. Further, mortgages are themselves an example of gearing. Both Ahmed and Sheila had familiarity with trusts. Sheila was the protector of the St. Bernard and ASK Trusts held through Hawksford. Ahmed was plainly familiar with trusts and their purpose as can be seen from his earlier correspondence with SCB, and in particular, with Harish.

More specifically, Ahmed’s evidence of his understanding at the time suggests that he fully comprehended what SCB was proposing to him, including concepts such as collateral, the consequences of negative equity, and differential rates of interest.

Ahmed said in court:

Later, in cross-examination he said:

In re-examination, Ahmed stated in relation to the Policy:

Sheila became a client of the Bank’s DIFC branch on Ahmed’s request and because she would be the settlor of the intended trust of the Policy. She was then already a private banking client of SCB’s Jersey branch. It was not contemplated (and it never happened) that she would personally be making any “complex financial investments” or maintaining any investment portfolio. Sheila confirmed that she did not expect to invest anything with SCB or take up loan facilities. The only service provided to her was a referral to SCTG for the purposes of setting up the SAHLK Insurance Trust to ring fence Kazzaz family assets to safeguard the interests of Ahmed’s daughters.

In all the circumstances, it seems to me that SCB had ample grounds within the terms of the COB to consider the Plaintiffs as having suitable financial knowledge and experience to be classified as Professional Clients.

Alleged Breach (7) therefore fails on the facts. In consequence, the Plaintiffs’ claims of breaches of the common law duty of care are rejected.

Breaches of the DIFC Regulatory Law

The Plaintiffs contend that the Defendants are liable to compensate the Plaintiffs for breaches of the DIFC Regulatory Law pursuant to Article 94 thereof. The latter provides:

The Defendants argue to the contrary that Article 94 only entitles the Plaintiffs to claim compensation before the DIFC Court (as opposed to the SICC or any other non-DIFC court) for the breach of the DIFC Regulatory Law. I shall, however, proceed by assuming (without necessarily accepting) that the breach of the DIFC Regulatory Law can give rise to a claim for compensation before a non-DIFC court such as the SICC.

In relation to Alleged DIFC Law Breach (1), the Plaintiffs rely on COB Rule 3.4.2(1) (“Suitability Assessment”). The Plaintiffs also cite Core Principle 8 (“Suitability”) in Rule 4.2.8 of the General Module (“GEN”) of the DFSA Rulebook. However, for the reasons already discussed, the Defendants reasonably formed the view that the proposed arrangements were suitable to meet the Kazzaz family’s needs. Alleged DIFC Law Breach (1) is not made out on the facts.

In relation to Alleged DIFC Law Breach (2), the Plaintiffs rely on COB Rule 3.2 (“Communication of information and marketing materials”) (especially Rule 3.2.1) which they submit required SCB to take reasonable steps to communicate information to the Plaintiffs about the PFA and its constituent parts in a manner that was clear, fair and not misleading. The Plaintiffs also cite Core Principle 6 in GEN Rule 4.2.6. However, as I have already found, SCB (through Harish, Laurence and Naushid) took reasonable steps to communicate information to the Plaintiffs about the financial arrangements that were being proposed to the Plaintiffs. I have not found that there was anything unclear, unfair or misleading about the information provided by SCB. I note that the evidence further suggests that Ahmed understood the nature of the services being proposed by SCB. The difficulty arose because Ahmed withdrew a substantial amount of the Ducie Court sale proceeds with the result that there were insufficient funds in the Kazzaz family’s investment portfolio to generate returns to meet the interest on the premium and mortgage loans. As a result, SCB had to make numerous calls upon Ahmed to top up the difference, thereby leading to Ahmed becoming unhappy with the financial arrangements that he had entered into with SCB. Alleged DIFC Law Breach (2) is not made out on the facts.

In relation to Alleged DIFC Law Breach (3), the Plaintiffs rely on Core Principle 2 (“Due skill, care and diligence”) in GEN Rule 4.2.2. However, for the reasons already discussed, the Defendants did not fail to exercise reasonable care and diligence. Alleged DIFC Law Breach (3) is not made out on the facts.

In relation to Alleged DIFC Law Breach (4), the Plaintiffs rely on COB Rule 2.3.1 (need to determine whether such a person is a “Professional Client” in accordance with COB Rule 2.3.2, in respect of all or particular Financial Services or products offered by an Authorised Firm). This has also been considered above. Alleged DIFC Law Breach (4) is not made out on the facts.

In relation to Alleged DIFC Law Breach (5), the Plaintiffs say that SCB acted as an insurance intermediary, because it advised Ahmed or Sheila to enter into the Policy, despite the fact that SCB was not licensed under the DIFC Regulatory Law to provide such type of financial service. The Plaintiffs say that SCB was thus in breach of Articles 41(1) and 42(3) of the DIFC Regulatory Law. This Alleged DIFC Law Breach was not pleaded. Further, such allegation was disavowed in the Plaintiffs’ memorandum dated 11 February 2019 setting out the “Plaintiffs’ Position on the Agreed List of Dubai International Financial Centre Law Issues”. In the memorandum, the Plaintiffs expressed their position to be that SCB was “at all material times, an Authorised Firm and so was exempted from the Financial Services Prohibition”. More particularly, the allegation was never squarely put in cross-examination to any SCB witness at the trial. The Defendants were not provided with a fair opportunity to rebut the allegation which was only belatedly raised in closing submissions. The allegation that SCB was wrongly providing the services of an insurance intermediary is thus not open to the Plaintiffs and is rejected.

For the foregoing reasons, regardless of whether the DIFC Regulatory Law can give rise to a civil claim for compensation before the SICC or any non-DIFC court, the Plaintiffs’ claims for breaches of that law fail.

Damages

The Plaintiffs having failed to establish liability on the Defendants’ part. It is unnecessary to consider the Plaintiffs’ claims for damages. I confine myself to a few brief comments on the Plaintiffs’ claims for damages.

Those claims are essentially tortious in nature. The Plaintiffs are seeking to be restored to the same position that they would have been if they had not entered into the various financial arrangements with SCB. On this basis, the Plaintiffs allege five heads of damage: (1) US$1,076,857.81 as the interest paid on the premium loan, (2) US$1,225,267.80 to cover the shortfall on the surrender of the Policy, (3) £141,913.64 as the additional interest incurred in purchasing the Westchester Property by means of a mortgage instead of cash, (4) US$1,500,000 from the forced sale of the Iraqi property to redeem the mortgage, and (5) US$178,983.66 as fees paid to SCTG and SCTC.

If the Plaintiffs are to be restored to the same position that they would have been in if they had not entered into any arrangements with SCB, the Plaintiffs must give credit for any benefits that they received as a result of the arrangements. Otherwise, there would be unjust enrichment at SCB’s expense.

Thus, in connection with Heads (1) and (2) claimed by the Plaintiffs, credit must be given for the fact Sheila was covered by the Policy from March 2011 to the surrender of the same on 8 December 2016 (a duration of 5 years and 9 months) so that over that period her beneficiaries stood to receive a pay-out of US$21.5 million in the event of her passing. The Defendants have suggested that the appropriate amount to be credited should be the premium that would have been payable if the Policy had been taken out for a period of 5 years and 9 months. The Defendants estimate that the relevant premium would have been US$2,781,249.24, an amount which would exceed the total (that is, US$2,302,125.61) claimed by the Plaintiffs by way of interest payments on the premium loan and the surrender shortfall on the Policy. The Defendants calculated the relevant premium by taking the minimum premium (US$40,307.96) needed to carry the Policy for one month in the Policy’s first year and multiplying that amount by 69 months. The Plaintiffs counter that, although the Plaintiffs may have enjoyed the benefit of the Policy’s coverage for a period of 5 years and 9 months, such coverage “must be seen together with the actual and potential liabilities and risks that the Plaintiffs took on during that same period as a result of the Premium Loan”. For example, the Plaintiffs say that “[n]otably, over a 5-year period, there was a potential loss of 71% of USD2.2 million, even without taking into account the interest charged”. I do not understand the Plaintiffs’ point. While it is true that there were risks (including a worst-case scenario), those risks would have been factored into the premium. The existence of the risks would not negate the fact that Sheila enjoyed the benefit of the Policy during the 5 years and 9 months of its existence. Accordingly, I prefer the Defendants’ analysis in relation to the amount of credit that should be given.

In connection with Head (3), there is a dispute among the parties as to whether credit should be given for any benefits that Ahmed might have obtained from the US$4 million that he withdrew for his Iraqi business. It appears, for instance, that Ahmed used between US$1.6 to US$1.7 million of the US$4 million withdrawn to purchase two properties in Dubai outright, rather than through a mortgage. Ducie Court was sold for £5,313,195.53. The Westchester Property was purchased for £1,750,000. If the Westchester Property had simply been purchased with part of the Ducie Court sale proceeds, it would have been possible to use the balance (a little over US$4 million at 2011 exchange rates) to purchase the Dubai properties and for use in the Kazzaz family’s Iraqi business. Accordingly, I do not think that the Defendants are right in saying that credit must be given for the use of the $4 million withdrawn by Ahmed.

In connection with Head (4), the Plaintiffs say that Ahmed had to sell the Salim Property for US$1.5 million at the end of 2016 in order to redeem the Westchester Property mortgage. Had Ahmed waited longer to sell the Salim Property, the Plaintiffs contend that Ahmed could have sold the same for U$3 million. The Plaintiffs accordingly claim the difference of US$1.5 million for the forced sale of the Salim Property.

The Defendants observe the Plaintiffs’ pleaded case was different from that pursued in court. The Plaintiffs plead that Ahmed had to force-sell an Iraqi property at a sum that was “substantially lower than the purchase price” and also lost rental income to prevent foreclosure of the Westchester Property. There is no evidence that the Salim Property had been rented out. Further, the evidence in support of a price of US$3 million if the Salim Property had been sold later consists of an undated Declaration by Hardi Ahmed Ali of “Real estate trading office Sarchinar” in the following terms (in English translation):

I am unable to accept the Declaration as reliable evidence in support of the alleged loss of US$1.5 million on the Salim Property. For example, when it is said that had Ahmed waited “longer” he would have obtained “US$3 million”, one asks: How much longer? What is the relevance of such later valuation date? On what basis was the sale price of US$3 million assessed? What comparables were used and what adjustments were made? Ahmed says that, from an Iraqi real estate valuer, one cannot expect the same degree of professionalism as from (say) Knight Frank. But that does not alter the fact that the evidence being proffered is essentially a bare assertion. Consequently, in the light of the Plaintiffs’ contradictory pleading and the unsatisfactory evidence of the Declaration, the alleged loss of US$1.5 million has not been made out.

In connection with Head (5), Ahmed had concerns about French and shari’a inheritance laws and considered it “very logical” to use offshore trust structures to protect his assets and ensure that they would go to his daughters. He stated in cross-examination:

It seems to me on the evidence that Ahmed would have entered into trust structures with SCTG and SCTC in any event. In those premises, I do not think that the Plaintiffs would be entitled to damages under Head (5).

For those reasons, even if the Plaintiffs had established some or all of their claims, they would have been entitled to a much lower amount than the total sum being claimed. There was a question whether Sheila was claiming for pain, suffering and loss of amenity in connection with the relapse of her depression. In their closing submissions, the Plaintiffs confirmed that they are not making such a claim.

Miscellaneous

The Defendants have argued that at least some of the Plaintiffs’ claims are time-barred. In light of my conclusions on the facts, it is unnecessary to deal with the Defendants’ case on time-bar.

Conclusion

The Plaintiffs having failed to establish liability on the part of the Defendants, the Plaintiffs’ claims are dismissed.